Tesla commits to building factory in Shanghai

The announcement came after Tesla had to raise prices by 20 percent in China

CALIFORNIA, U.S. - Days after Tesla was forced to raise prices of its cars by 20 percent in China in response to import tariffs, the automaker has now announced its new agreement.

Tesla said that it has signed an agreement to build a factory in Shanghai, claiming it will build a "Gigafactory" to make electric cars.

Making the announcement, Tesla revealed that it expects construction of the factory to begin "in the near future, after we get all the necessary approvals and permits."

The company said that once the process begins, it will take about two years before Tesla can start making cars.

It said that it would take another two to three years before the factory is fully ramped up to its capacity of 500,000 cars.

Tesla pointed out that it had bee planning the move since at least last year, but signed an agreement with the Shanghai Municipal People's Government only now.

Tesla said in its statement, "Last year, we announced that we were working with the Shanghai Municipal Government to explore the possibility of establishing a factory in the region to serve the Chinese market. Today, we have signed a Cooperative Agreement for Tesla to start building Gigafactory 3, a new electric vehicle manufacturing facility in Shanghai.”

It added, “We expect construction to begin in the near future, after we get all the necessary approvals and permits. From there, it will take roughly two years until we start producing vehicles and then another two to three years before the factory is fully ramped up to produce around 500,000 vehicles per year for Chinese customers. Tesla is deeply committed to the Chinese market, and we look forward to building even more cars for our customers here.”

It said, “Today’s announcement will not impact our U.S. manufacturing operations, which continue to grow.”

Following the announcement, shares of the company climbed nearly 2 percent on Tuesday.